ACI Market Commentary 5/7/2021
May 7, 2021
Corn markets continue to print new contract highs this week as Brazil weather remains dry in most of Mato Grosso. The Safrinha crop is facing at least two more weeks of hot and dry weather during the critical pollination stage which could create havoc on possible production. Boots on the ground continue to reduce exportable quantities to around 95-97 MMT versus the 109 MMT the USDA is estimating. This reduction will force some big buyers to turn their buying attention to others, including the US where stocks continue to get tighter.
US weather models aren’t very friendly either as most currently agree that little relief will be coming; with North Dakota already experiencing extreme drought conditions across most of the state, other states like South Dakota, Illinois, Iowa and others seeing dry conditions forecast over the next couple of weeks.
Flash sale of 1.36MMT of new crop corn to China came as little surprise to the market as chatter for the last week has focused on China buying November – March timeframe and some new chatter late in the week had China interested in Spring and Summer ‘22 timeframes, doubtful this far out but where there is smoke, there is fire.
There is little change to our recommendations. Keep selling as we feel more comfortable with moisture and planting progress. Keep lots small and layer sales in.
WE STILL LIKE THE CROP.
The soybeans are joined at the hip with corn and hasn’t left the party yet. November ‘21 futures are at contract highs at time of this writing. For reference in terms of how high this market has run, we are trading roughly $5.50 a bushel higher on the new crop contract than this time last year…certainly reason to celebrate. Dryness/rain forecasts and overall acres are going to be watched closely, with North Dakota acres extremely important. Keep forward sales small but reward the market if you have room to do so. Keep a very close eye on 2022 levels too. Currently, we are trading $12.50-$12.75 futures, approaching a $12 cash bean for next year. With regards to 2022, expect the South American farmer to plant as hard as they possibly can at these levels. Next year could bring any number of different scenarios. Work on getting a solid base set up for success on marketing at these levels.
Minneapolis wheat continue the climb higher, finishing the week 34 cents higher. The trade has started figuring out how many acres have shifted out of wheat with the late rally in soybeans, canola and corn. Dryness concerns in ND and Canadian plains growing region also continue to support prices. Commitment of traders report shows funds as buyers of Minneapolis and KC wheat and sellers of Chicago. Keep an eye on 2022 prices if you plan to have wheat in the rotation. We closed MWU22 at 7.06 this week and traded as high as 7.09.
Have a good weekend!
Grain Team – Aaron, Brentt, Connor, Dallas, Hank, James, Jenna, Kevin and Seth